The Revenue Has Filed The Present Appeal Impugning An Order Dated07.12.2023 Passed By The Learned Income Tax Appellate Tribunal [Itat] Inita v. Santur Builders P.ltd. In Respect Of Assessment Year [Ay] 2016-17

$~19 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 252/2024 COMMISSIONER OF INCOME TAX (TDS)-2.....AppellantThrough:Mr Vipul Agarwal, Advocate.versusM/S SANTUR BUILDERS PVT. LTD......RespondentThrough:Mr Debarshi Chakraborty and MrSarthak Jain, Advocates. CORAM:HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MR. JUSTICE TEJAS KARIAO R D E R %19.03.2025 1.The Revenue has filed the present appeal impugning an order dated07.12.2023 passed by the learned Income Tax Appellate Tribunal inITA No.1973/Del/2023 captioned Income Tax Officer v. Santur Builders P.Ltd. in respect of Assessment Year 2016-17. 2.TheRevenuehadfiledtheaforementionedappeal[ITA1973/Del/2023] assailing an order dated 10.05.2023 passed by the learnedCommissioner of Income Tax (Appeals) [CIT(A)] whereby the Assessee’sappeal against an order dated 22.03.2023 passed by the AssessingOfficer under Section 201(1)/201(1A) of the Income Tax Act, 1961[the Act], was allowed. 3.The AO had issued a Show Cause Notice dated 02.03.2023 callingupon the respondent [Assessee] to show cause as to why it should not betreated as an “assessee in default” within the meaning of Section 201(1) ofthe Act “in respect of TDS on amount of Rs. 14,29,20,000/- paid toHUDA/DTCP during the Financial Year 2015-16” and why interest under Section 201/201(1A) of the Act may not be charged on account of the saiddefault. 4.Whilst the Show Cause Notice dated 02.03.2023 mentioned that therewas a default on the part of the Assessee in respect of TDS, it did notmention any provision of law under which the Assessee was required todeduct TDS on the payments made by it to Haryana Urban DevelopmentAuthority or the Director Town and Country Planning, Governmentof Haryana on account of External Development Charges . 5.It is the Assessee’s case that no tax was required to be deducted atsource on the payment of EDC as it was made in the nature of payment toGovernment in compliance with the statutory provisions. 6.The proceedings initiated pursuant to the aforementioned Show CauseNotice, culminated in an order dated 22.03.2023 raising a demand of₹2,65,83,120/-, which comprised of an amount of ₹1,42,92,000/- for default under Section 201(1) of the Act and an amount of ₹1,22,91,120/- on account of interest under Section 201(1A) of the Act. It is material to note that theAO held that the payments made by the Assessee to HUDA were in thenature of rent and therefore, the Assessee was required to deduct tax atsource under Section 194I of the Act. The said reasoning is set out below: “6. Applicability of TDS provisions on EDC: (i)EDC payments are in the nature of rent u/s 194I andrequired to be subjected to TDS accordingly. Thedefinition of rent provided u/s 194I is wide enough tocover EDC payments. The definition is as under:required to be subjected to TDS accordingly. Thedefinition of rent provided u/s 194I is wide enough tocover EDC payments. The definition is as under: “Explanation – For the purposes of this section, – (ii)“rent” means any payment, by whatever name called,under any lease, sub-lease, tenancy or any otherunder any lease, sub-lease, tenancy or any other agreementorarrangementfortheuseof(eitherseparately or together) any, – (a) Land; or (b) Building (including factory building); or (c) Land appurtenant to a building (including factorybuilding); or (d) Machinery; or (e) Plant; or (f) Furniture; or (g) Fittings,Whether or not any or all of the above are owned by thepayee;” “Explanation – For the purposes of this section, – (ii)“rent” means any payment, by whatever name called,under any lease, sub-lease, tenancy or any otherunder any lease, sub-lease, tenancy or any other agreementorarrangementfortheuseof(eitherseparately or together) any, – (a) Land; or (b) Building (including factory building); or (c) Land appurtenant to a building (including factorybuilding); or (d) Machinery; or (e) Plant; or (f) Furniture; or (g) Fittings,Whether or not any or all of the above are owned by thepayee;” The cost of acquisition of land is paid by HUDA whichtransfers and gives possession of land to private builders. HUDAdevelops urban infrastructure on land by undertaking EDWs. HUDAtransfers land to private builders who has to pay user fee for thedeveloped urban infrastructure which is named as EDC (externaldevelopment charges) under the license to set up commercial set ups.EDC would be called rent ‘... any other agreement or arrangementfor the use of (either separately or together) any, - (a) land; or ....’.Therefore, EDC ought to be subject to TDS under 194I @ 10%. In view of the above, the deductor assessee has failed todeduct the tax as required under the provisions of Chapter XVII-B ofthe Income-tax Act, 1961. Hence, the demand of Rs. 1,42,92,000/- israised against the assessee on account of non-deduction of TDS u/s 201(1) of the IT Act. The deductor assessee has failed to deduct the tax as requiredunder the provisions of Chapter XVII-B of the Income-Tax Act,1961. Hence, the assessee is liable for Penalty u/s 271C of theIncome-tax Act, 1961.” 7.The Assessee appealed the said decision before the learned CIT(A).The learned CIT(A) allowed the said appeal following the decision of thelearnedITATinM/sRPSInfrastructureLimitedv.AdditionalCommissioner of Income Tax: 2019 (9) TMI 39 ITAT (Delhi)). In the saiddecision it was held that HUDA was executing works for and on behalf ofDTCP, which is a government department and therefore, the assessee wasnot required to deduct tax at source. The Revenue appealed the said decisionbefore the learned ITAT and the learned ITAT, following its earlierdecisions, dismissed the appeal. 8.In view of the above, the Revenue has projected the followingquestions of law for consideration of this Court: “A. Whether the ld. ITAT erred in, deleting the applicability of taxdeduction on EDC payment made to HUDA?deduction on EDC payment made to HUDA? B.Whether the Hon’ble ITAT erred in not remanding the caseback to the AO to decide the applicability of the tax deductionunder the provisions of Income-tax Act, 1961 afresh on meritsconsidering the nature of payment made to HUDA?”back to the AO to decide the applicability of the tax deductionunder the provisions of Income-tax Act, 1961 afresh on meritsconsidering the nature of payment made to HUDA?” 9.The question whether the EDC charges are in the nature of rent andTDS is required to be deducted on the said charges under Section 194I of theAct is squarely covered in favour of the Assessee by an earlier decision ofthis Court in DLF Homes Panchkula Pvt. Ltd. v. Joint Commissioner ofIncome Tax: 2023 SCC OnLine Del 2026. 10.In view of the above, the AO’s order dated 22.03.2023, which was thesubject matter of Assessee’s appeal before the learned CIT(A) and theRevenue’s appeal before the learned ITAT is unsustainable. In this regard,no substantial question of law would arise in the given facts of this case. 11.Having stated the above, we also take note of the contentionsadvanced on behalf of the Revenue that the question whether TDS waspayable under Section 194C of the Act in respect of EDC charges is coveredby a decision of a Coordinate Bench of this Court in Puri ConstructionsPrivate Limited v. Additional Commissioner of Income Tax and Others:(2024) SCC OnLine Del 939. However, as noted above, it was theRevenue’s case that the TDS was payable under Section 194I of the Act andnot Section 194C of the Act, which concededly is unsustainable. 11.Having stated the above, we also take note of the contentionsadvanced on behalf of the Revenue that the question whether TDS waspayable under Section 194C of the Act in respect of EDC charges is coveredby a decision of a Coordinate Bench of this Court in Puri ConstructionsPrivate Limited v. Additional Commissioner of Income Tax and Others:(2024) SCC OnLine Del 939. However, as noted above, it was theRevenue’s case that the TDS was payable under Section 194I of the Act andnot Section 194C of the Act, which concededly is unsustainable. 12.In view of the above, no substantial question of law arises in thepresent petition. The appeal is, accordingly, dismissed. VIBHU BAKHRU, J TEJAS KARIA, J MARCH 19, 2025RKClick here to check corrigendum, if any